Common Overlooked Tax Breaks

Written by on November 2, 2012 in Money - No comments | Print this page

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Tax breaks offered by the IRS can lower your tax bill and reduce the stress of filing your tax return. Understand and take advantage of the tax breaks your household qualifies for to avoid spending more money on your taxes than you need to.

FECA

The Federal Employees Compensation Act, also known as FECA, provides a tax break on payments made to employees as a result of injury or illness or compensation given to the employee’s beneficiaries in the unfortunate event of death. Keep in mind, however, that this tax break does not take effect until after the payment claim is settled completely, up to a 45 day window.

Long-Term Care

A contract you have for long-term care insurance is not a part of your taxable income as long as the recipient has suffered an injury or is ill. However, refund of any premiums paid or dividends from the insurance contract are taxable according to the IRS.

Victim Compensation

Many states have a fund set up that compensates the victims of certain crimes. If you received compensation from such a fund after being victimized you do not need to pay taxes on the money you were given. You are not allowed to claim a tax deduction on medical and insurance bills paid with this money, however.

Dental & Medical Bills

Dental and medical bills you paid that exceed 7.5% of your income, before taxes, qualify for a tax break. Expenses that can be claimed as a deduction are numerous and varied, such as medications, co-pays, and even changes made to your home to accommodate a medical situation. Bills related to in-patient hospital treatment can also be included in the deductible medical expenses.

Welfare

Welfare benefits you receive, like disability payments, are eligible for a tax break and should not be included in your yearly taxable income. Be sure to retain any documentation you have on the welfare benefits you get, as there are strict penalties for taking advantage of tax breaks on falsified welfare claims. Occupational rehabilitation given to you as the result of a disability is also exempt from being included in your taxable income.

Mortgage Assistance

There are two mortgage assistance programs which qualify for a tax break. If you received help with your mortgage through either the National Housing Act or Home Affordable Modification Program you do not need to include that assistance as part of your taxable yearly income. However, any mortgage interest paid through this program is not tax deductible, like the interest you pay out of pocket.

Take advantage of the tax breaks you qualify for to avoid paying more than you need to and to increase your potential IRS tax refund.

Jayson works for Top Tax Defenders in Houston, TX. They are a tax resolution firm that is devoted to protecting taxpayers from the IRS. They offer customized tax planning services so taxpayers can effectively manage their finances and proactively prevent tax related problems.

Image courtesy of Grant Cochrane / FreeDigitalPhotos.net

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